Conditions now perfect for buy-to-rent investors, says Bill Rawson
Many leading figures in property marketing have recently been saying that, if you have access to bond finance or private funds, now is the time to buy residential property - but possibly none have put their message across quite so strongly as Bill Rawson, who told some of his Cape franchisees this week that they should right now be urging clients to “beg, borrow or steal” finance for residential property.

Like others, Rawson said that the recent interest rate drop and the expectation of further 2½% to 3% drops before the year end have brought investors back to the market - and a surprisingly large number of these, he added, are buying with cash. This, he feels, confirms the prediction he made last year that some investors in 2009 would switch from JSE Securities Exchange shares to property.

“The big advantage for buyers right now,” he said, “is that there are far more sellers facing the market realities and prepared to accept sensible prices. This is a big inventive for those buyers who have watched the market trends closely over the last year.”

The values obtainable in the market today, said Rawson, are on a par with those of 2005 and, to him, represent “the best investment opportunity of the last two decades”.

Rawson warned that interest rates, though set to fall “quite spectacularly” this year, would almost certainly rise again in response to a revival in inflation towards the end of 2010. The “buying window” will, he said, therefore not last that long.

“Traditionally,” he said, “property prices rise with increased interest rates. In South Africa prices are likely to be pushed up further by the lack of development stock, which most of us see continuing to be felt until well into 2010, by when, it is to be hoped, bonds will become more readily available.”

Evidence that demand is on the increase, said Rawson, comes with the news that his group’s March sales were 30% up on those of March 2008 - but, he said, it has to be accepted that anything up to 40% or even more applicants will be unsuccessful in their bond applications.

Reverting to his buy-now theme, Rawson said that in the current scenario buyers with the time to spare should put in a series of ultra-low offers on property they regard as having potential. A surprising number of these offers have recently, he said, been successful and at current price levels often give a very satisfactory rental return.

These successes, he said, have been in all categories, not excluding the luxury house category: some houses in the R5 million to R25 million category had reduced their prices by between 25% and 40% since the start of the near-recessionary conditions. At these price levels, he said, every one of the recently bought homes was a good buy.

The increased activity now becoming evident in the market, said Rawson, could be far greater if the banks were able to finance more bonds. However, with limited funds available to them, they are, he said, forced to back only the deals that give them the highest returns and the greatest security.

“The banks’ position is, however, strengthened by their ability these days to do thorough credit checks and thereby avoid poor borrowers. These technology-backed checks are instantly available and operate countrywide and although they have on occasions been taken to almost ludicrous lengths they have enabled bond issuers to knock out virtually all people with poor credit records.”

It is important, therefore, added Rawson, that anyone now applying for a bond, even a small one, should check the black listings themselves and ensure that they are not on them. An experienced agent can help in this matter, he said.

Rawson revealed that his development company will shortly be moving ahead again, this time, however, on a R100 million retail complex in the heart of Rondebosch. Full details of this will be revealed within the next fortnight. This move should not, he said, be seen as an indication that Rawson are exiting the residential market - they will definitely be back here - possibly as soon as early 2010 and they are particularly interested right now in the affordable sector where, he said, it is widely agreed that there are far too little home ownership opportunities available, even though the demand for these is strong.

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